tv Bloomberg Markets Americas Bloomberg March 3, 2017 2:00pm-3:31pm EST
policy changes will be put into effect -- changes that affect fiscal policy, what its size, composition, timing is likely to be -- how that is going to affect the most of my colleagues and i have decided that we should simply be patient and wait to see what happens, and alter our economic forecast and views on appropriate policy until we have a clear understanding. if you think about my comments referred toe hardly possible forthcoming fiscal , and tried to explain what i see as the appropriate resolution -- evolution of policy based on the trend we are seeing in our economy right now. there is nothing that i said
that would be a response to possible impending policy changes. let me emphasize that fiscal policy is only one of many factors that affects the economy, and there could be other factors, shifts and developments in the global economy that could be more important. so fiscal policy and other matter, butes could we are going to wait to see just how that evolves. but as you speak about all those other factors that impact the economy, would you project to be the biggest challenge for the u.s. economy in the next five years, or example? chair yellen: i think the global had very important been a very important
factor in the outlook for the u.s. economy. this point, i am pleased to be able to a that looking at the global economy, at least for the next few years i see the risks being more balanced than i have in some time. the european economy is growing in a more solid pace than it had earlier, inflation is moving up , data on japan and on growth has been somewhat more positive. china, over its growth has been from the breakneck, double-digit pace it enjoyed earlier. more than expected. it's economy, partly as a result of chinese policies, has continued to grow and management of its currency has been better toerstood and we are led
less volatility. brexit remains and what will happen with european integration , that is an issue that is a risk. china, while it is growing at a solid pace, has seen a very rapid growth and credit and andease of bad debts developmentsan -- in real estate prices have posed challenges. the tools are there for with theses to deal challenges, they are risks that affect the outlook as well. a myriad ofth stakeholders on a day-to-day basis. we just talked about some of the impact from the external forces. oft is a day in the life chair janet yellen look like? [laughter] chair yellen: a typical day in the life of chair yellen has
many hours blocked off that say meet with staff, meet with staff, meet with staff. we have a ride range of range ofility -- wide response ability. we talked about monetary policy today. we have a lott -- of other responsibilities and supervision and regulation for the consumer and community and the other governors and i, we are privileged to have a wonderful staff both at the .oard and at the reserve banks highly professional staff, highly motivated staff, staff who are highly devoted to public service. discuss ath them to wide range of matters that are in our purview. and for days like that i really
enjoy. to me, that is the most rewarding part of the job. there is lots of other stuff. you know, i am responsible for working with congress and making memberst congress understand the issues facing the fed and the economy, so a typical day might have a meeting with a member of congress, a one-on-one meeting. i testify periodically, i have press conferences after our regional meetings. we have wonderful federal reserve systems with operations throughout the country, and i talked to and confer with my colleagues in the reserve banks and meet with other government officials. it has been a long-standing andition that the fed chair
treasury secretary meet on a regular basis. meetsard of governors regularly with the council of economic advisers in the white house. we meet with members of the executive branch, with congress, and we also have any stakeholder .roups that come to visit us as david mentioned in his introduction, we served on a group called the federal advisory council, which is a group of bankers representing each of the 12 federal reserve meetings, and we have once a quarter in which we have a series of questions about the economy, regulation, supervision, we discuss those with a variable group. -- meet with groups of
community bankers, homebuilders, representatives of labor. we try to meet with people representing many different aspects of the economy. i talked about government statistics. we look at lots of government statistics and evaluating the economy, but the first-hand contact that we have with individuals who are operating in theses and households labor market, there is no substitute for that kind of contact. a typical day we will also have meetings with outside groups. >> and dinnertime, right? [laughter] >> we talked a little bit about that before. many of you may not know that chair yellen's husband is actually a novel winning -- a winner in economics, and their son is also a professor of
economics. how do the discussion that you discussion ate your dinner table go, and you ever give you advice? [laughter] chair yellen: you have guessed correctly that when three phd get together, the odds are pretty good that economics are going to be an important topic of conversation. [laughter] chair yellen: my son lives in england now, so there is a time difference. but as it turns out, he will often call us at dinner time and we will sit the telephone on the table as my staff and i eat dinner, and so even though he is quiteom us we continue frequently to talk to one another about topics over dinner . does not do my son macro economics. he does microeconomics, and that
.akes a little bit of relief for they have a lot of opinions about my business and don't hesitate to share them. [laughter] >> i'm sure. can you think a little bit about little janet yellen in brooklyn. not six orou were seven and said i want to be the chair of the federal reserve. what would you say when people ask you what you wanted to be when you grow up, and how did you get involved in economics? chair yellen: in high school, i would not have said i expected to be an economist. i was interested in math and science, and really enjoyed mass. -- math. ien i went to college, thought i would major in it. i'd have a course in economics my freshman year, and that was love at first sight. >> which one?
chair yellen: it was a survey course. i really liked the form of reasoning. i liked the fact that economics is a logical subject that has a way of analyzing issues that is systematic, and that appeals to the mathematical side of me, but i was really impressed that economics is the subject about human welfare and people's lives, and how to make them better. understanding the kinds of developments, and of course my parents have lived through the great depression, and their discussion of that experience was part of my childhood growing up. i knew that it was possible that there would be economic events that could cause massive disruptions to an economy and
create harm to many individuals and households. me that myether for concern about people and jobs and my love of math foundation happy marriage in economics, and i have enjoyed using those tools and working on that problem ever since. one last question that came from so many people in the room. can you comment on the approval of the u.s. allen streets -- strategy of the approval of the u.s. balance sheet? chair yellen: i think it refers to the countries. >> exactly. chair yellen: when you say there is a balance sheet, there is also a government balance sheet. que correct. at present, the
u.s. dipped -- debt to gdp ratio stands resolutely 5% -- around 7.5%. by global standards, that is high but not a frightening level. it is not a level that is associated with initial crisis. crisis.cial but it is higher than it was before the financial crisis, which was a long crisis, depressed the economy, caused deficits just because tax revenue was depressed, and social payments, transfer payments rose. for part of the time, there was active fiscal policy that provided stimulus. the debt to gdp ratio rose quite a bit from before the financial
crisis to now. at this point, u.s. fiscal deficit federal fiscal are at a level that should keep the debt to gdp ratio roughly 5-10ant for the next years. it is not moving down under baseline projections, and it is also not moving up very rapidly. but after that, as the baby see an retire and we immeasurable increase in medicare and social security payments, that is a share of gdp , all the projections -- and this is not new, this is something we have known for at least 20 or 30 years -- the
projections, and it is mainly because of health care expenditures because of medicare and an aging population, and the trend in which medical prices have generally been rising more rapidly from the price levels in general. board -- the next of of the debt to gdp beach ratio -- gdp ratio, and it changes that means changes in action spending or policy to address it. to be, it is very unfortunate we have had 20 or 30 years to prepare for this by making changes, not pleasant changes to have to make, and really nothing has been done about it. exists thatend that will eventually have to be dealt
mind that isto my the balance sheet challenge that people should be thinking about and recognizing, it is there and buyers attention -- requires attention. thank you very much. chair yellen, on behalf of the board, members, and guess, i would like for you -- to thank you for an extremely stimulating situate that conversation. >> chair janet yellen spoke upon economic policy. she was an cap slitting a weekend of fed officials sounding more and more hawkish, saying a march rate hike is likely possible. >> we have seen a surge in expectations this week. >> she is basically saying that if the economic state continues,
if the economy of all that is expected, then a march rate hike is appropriate. it was interesting because there is not a lot of evolution that can happen over to week, right? -- two weeks, right? > >> we do have the jobs report coming. >> there is no evidence the fed has fallen behind the curve, those were heard words -- her words, and so now the markets think it is a certainty. >> we can choose between fed funds futures and ois. high rateility of a now is 97.5%. let's compare it to march 1. it was at 92%. to,go back to saying -- say, february 26, 47.8%. >> that is that incredible volatility and what the market sees as indicators for interest rates. it is pretty incredible. >> let's head down to julie for
a check of the markets and any change we saw to janet yellen speech -- yellen's speech. >> there has not been much may change, and that is because janet yellen used her speech to underline and emphasize what we have been hearing over the past resetr so where they have the expectations for the rate increase on march 15 we wereally, and as discussing earlier leading into her comments, the reaction has been quite orderly throughout the week. we saw some big moves, but nothing that felt like it was so unexpectedt of that folks were scrambling to keep up with it. if you look at stocks today in ay sheight sheet -- w talked about, they were actually more during her speech. if the s&p 500 falls today, it
will be the first time since late january that we have seen a back-to-back decline for the s&p 500 on a percentage basis. we have a couple hours left in trading, so we will see what happens. let's take a look at the rate market as well. the tenure, for example, -- 10 year, for example, the 10 year yields are lower than where they were from which he began speaking. up still at 2.5%, and we have a scene -- seen a 19 point increase on this note. that is the reaction to the other fed commentary we have gotten. if you look at what is going on in the currency market, the dollar is down a little bit today. if you look at wcrs, you can see theit is doing compared to dollar currency. the peso gained the most against the dollar, and against -- once -- once a new and nafta trade gets out, it will be good
for the peso. and i want to hit on some breaking news that we got 20 minutes or so. deutsche bank is planning to boost its capital by 10 million euros. -- $10.610.6 billion million. people according to familiar with the bank plans. we are seeing the stock swing lower and german trading, but in earlier reports that some title capital raise was talked about. now we have a specific number. you so stuff, thank much. for more analysis, we are joined by the global editor of economics for bloomberg news and our senior markets editor who is working on this particular bloomberg. we are looking to the analysts and economists during yellen's speech, and one from unicredit as that perhaps the fed is getting behind the curve and that is why it feels the need to
eat grilli poll for the next move. what is your thought on that? >> there is no indication from the chair that she feel that way. ae offered through the speech fairly robust defense of where they have been, where they are now, and where they see they are going. she mentioned the prospect of three increases this year, which is what they have all been saying this, which is what the report showed. me,other thing that struck scarlet, is that she spent quite a bit of time talking about how the international environment in previous years had been quite a ak and seemite we to exhibit that it to a higher rate of increase is your purity seem to go out of her way to resource research that she is increases here. she seemed to go out of her way reassure us that she
is taking time. as written this week, there is a fairly synchronized picture emerging of global growth. that is going to encourage the fed and make them feel better, and we can see the love that confidence coming rue. i also want to point out that she addressed the idea of them being behind the curve. she said we had no evidence yet. i also want to point out that she addressed the idea of them .
banks leading the game today, the stock market is weak but we have had a huge runoff. like people are content with the pace of rate hikes this year, and we are really looking at the economic data. there is this whole physical bump in growth that people were hoping for. even if it is delayed, everyone is ok with that for now. maybe it will be at 2018 and we peoplet a bump then, but are pretty content with the passage of the economy. that said, there tends to be dips in the market in the first year after an election. i was reading a note earlier that 90% of the time there was a decent -- >> that was part of his thesis -- >> yeah. the thesis is that it will peak at 2400 and weaken to the rest of the year, maybe 220 300.
o 2300.e t0 >> and that is an interesting number. >> and we will also have the jobs report coming out. so much for joining us. let's look at the breaking developments on deutsche bank. the german lender is said to be nearing a plan to raise to -- $11$11.6 million billion in capital, 10.6 billion -- $10.6 billion. we reported earlier in the morning that they will be seeking some kind of way to get some capital. what you make of the decision here? he became the co-ceo and then ceo. he kept saying we do not need more capital. [laughter] but we have talked before, i have come on your show many times before to talk about deutsche bank, and a couple of
times i has said when their share price goes higher, they should have done it. always do not want to do it, and when they realize they have to do it, they [indiscernible] >> don't get as much? >> no. it is still low compared to most historical rates, but it has improved a lot. compared to last fall when everyone was rigged out and no one knew how much they were going to pay in fines to the it., this has improved and is the opportunity, before it goes down again, let's get some shares. >> this is the best option at the moment. what is this mean in terms of deutsche bank's ability to return to normal? cutinstance, they had to bonuses by a percent for the global investment banking team. at some point you will lose your talent and not be able to get back to normal with the capital markets operation. >> they are connected, so they do not want to do it another
year. they do not want to repeat that for 2017, sout what they need to do is raise capital. what bothered me among the of the decisions we heard in our story today is not capital raise, that had to be done even though they are late to it, but that they are not selling [indiscernible] .- postbank they want to reintegrate posting -- postbank. -- how a lot of connections to that. >> and mortgages are not very profitable in germany. >> i do not think it will take the route of doing the ipo. >> the asset unit been -- asset management unit might -- might reintegrate postbank, the other is ipo and cell phone shares of their sell-management unit -- some shares of their asset-management unit.
that good part is that that it helps the capital. about hearted as their most profitable unit and you give away 30% of your profit to other people, the shareholders. it is ok. you have enough money, but i think they had -- which they had other -- wish they had other options. yourank you for much-needed perspective on deutsche bank's attempt to raise new capital, $10.6 billion. details on have earning belgians of cash, and the rise to the top from new york. this is bloomberg.
this is a bit of a comeback on the five-day chart. it comes a little bit of a rebounding from three days of losses. still on track for the biggest weekly drop since november. it is all by 1.8% in the week. there is a prospect of a fed rate increase on later this month reinforced by janet yellen moments ago, making resources like precious metal less attractive. rising for a three-week low to session highs right now to so we aret $53.31, also seeing nymex crude oil .ising 1.4 -- 1.4% and gasoline is also getting more than 8%. if you pull it up on the bloomberg, look at this particular chart. you can see that the price differential between previous carline that fuels luxury like your bmw or audi is rising at a faster pace than that of regular gasoline. premium cost
the low city cents a gallon costs almostium $.50 a gallon extra. and there are in viral that environmental rules kicking in this layer -- you're limiting sulfur, so that could cause costs to go up higher. thes get a check on headlines. mark has more for us. mark: russians prime minister called it a replay of mccarthyism. sergey lavrov was responding to debt controversy over u.s. attorney general jeff sessions and his meetings with the russian ambassador to the u.s.. russians has recused himself from any investigation into russia's meddling in the presidential election. joehe 50's, u.s. senator mccarthy let a search for communists in the u.s. government. vice president pence used his personal email to it -- conduct state business lobby governor of
-- while he was the governor of indiana. it was said last year that the count was -- account was compromised by hackers. this says fences emails and not deal with class that information --s email did not deal with pence's emails did not deal of classified information. and civilians are fleeing basel, as rebels are hooking up with the militarized police forces. many of the civilians escaped from a part of mobile -- mosul held by islamic state. if spokesman says over 28,000 since left western mosul military operations began last month, and a quarter of a million people remained trapped inside the area. your parade in that european -- europeanhigh
union prime ministers will discuss holding discussions with israel over a commitment to a two state solution. diplomats that the eu must be clear in its dealings with israel, especially clearing the trump and ministrations unclear position on the ongoing conflict. the eu is the biggest aid donor to the palestinians, but holds little influence over israel. malaysia has deported the only north korean detained in the killing of kim jong-un's half-brother. to north korean diplomats are there -- their was surrounded by photographers. global news, 24 hours a day, powered by more than 2600 journalists and analysts in over 120 countries.
oliver? oliver: after star money manager pimcoross left in 2014, seemed destined to fade from prominence. for more on pimco's new bond star, let's talk with john gittelsohn in los angeles. what has this been achieved and how has he done it? vascyn is now larger than pimco mutual return funds. did year, his fund attack -- attracted more net inflows than any other mac fund -- actively managed fund. he goes for income, which means he invests in depth that provides income -- debt that
provides income. he has avoided losses, for example last year going short on duration as interest rates rose. so he has a strategy that worked out, but how does this differ from bill gross, who even though he left years ago, we refer to him as the dominating style, perspective of pimco. don: one is in personal style he one is investments focuses on in his personal funds. he does not have a benchmark for those. he goes anywhere on this. short go long-duration or duration, by foreign currencies, , derivatives, short stuff. he had a wide range with this fund. he basically says i will not lose your money and i will beat
a basic benchmark. he is not tethered to anyone group of funds. as far as his style, he is out of the spotlight. he is a man who likes to bury mortgage pooling and servicing agreements rather than going on tv. oliver: so you the technical mind in some sense. here.s the clarity he was already wanting a fund that pimco -- running a fund that pimco, and after he was tapped to replace gross, where is the capital coming from and how does it compare to what ill gross is running at this point? -- bill gross is running at this point? john: his fund is almost $1.9 billion, which is less than 1000 001% of what they are
running at pimco. there is a big difference in the scope of what they are seeing. one funds is running now, and ivascyn sees all investments. he is the chief investing officer. he oversees this one fund that sampleit -- give you a of his style of investing, but everyone who the final word on investment and hiring from everything from currency, emerging markets to private strategies like hedge funds and credit opportunities, real estate. scarlet: and there is no love lost between these two men. pimco for a breach of contract. what is the update on that? that suit is still underway. hearing, thefirst actual court date is for september. those can always move.
possibility they could reach an out-of-court settlement. in that suit, gross said iversen let acabal -- ivascyn ball of -- cabal of executives who forced him out. they wanted to diversify pimco away from bonding. they wanted the bonds and burgers strategy, as he said in the lawsuit. coming up, shares of snap popping in the debut but dimd slow user growth investor optimism? from new york, this is bloomberg.
let's look at some of the biggest business stories in the news right now. what you make has a plan to boost y $10.6 billion. byt is including with -- $10.6 billion. that is according to people with knowledge of the matter. to sello are looking off part of their asset management unit. it says they could reintegrate its commitment to the small banking business, postbank. comcast and nbc universal have radically increase their bet on digital media. they invested $50 million in snaps ipo. -- comcast has also made two separate $200 million payments on buzzfeed. oliver: the public debut of snap got a lot of attention as it could signal the tech ipo climate, which dried up yes
dear, could be a bit of revival. carolyn, take it away. about snap was all this newcomer who has been helping cover the story. , dayround this table, alex two after the megadeal yesterday, shares are still higher? -- still about $23, above the ipo price. though the concerns, looking at what analysts are saying, the euphoria comes to mind from some of the notes we have read. it feels like a successful ipo so far. we have also got news on the likes of comcast investing $500 million in the ipo with self -- itself. that is about 50% of the shares
that were sold. for the mediaslot company getting into digital media. >> talk about before it. it is the make -- euphoric. it is the big work right now. down -- lee tracked him liu tracked him down , andow it is worth so much they sold sunday of it in the ipo. it was $78 million if i remember right. benchmark was the biggest holder, but lightspeed got in early, and it is not just the snap investment. it is apt dynamics, mechanics, -- app dynamics, mechanics, that stuff. about gettingink
bought by cisco the day before it gets public, so when it comes to the lack of exits, it does seem like we have done it right. we do not know if it is then pushing their founders or picking the right ones, but a good outcome here. >> and they are getting in very early, which is what you need to do if you want to be a top firms, and a lot of the company by the time it goes public like snapchat did. andnd this is a bigger bigger place in seed investing in silicon valley. let's split our attention to a hasany who is not had dust not had such a euphoric week. eric, coming from over you uber you- over -- managed to get this video? driverink every uber thinks about confronting their boss. after an eight minute right, the
going said i'm bankrupt because of you. bit of a maybe had a drink or two, but what he has done is apologize. >> and there is a lot of questions about his leadership abilities because of this. this is how you react with your employees, and he is dealing with sexual harassment lanes, so there is a lot of complaining that concerns going on -- concerns going on right now. ,o talking to them about uber this was a name that folks would consider might be of the size that could go. please assume of the paramount concerns that could keep a company from getting out, regardless of the companies plans right now -- company policy plans right now. they say they are going to wait. when it comes to a future path, if they ever decide to go in the near term, these risks will be
layered on top of all the regulatory earns and those things we have seen in the past. we had peter come on, who is -- coveredmost mass one of the most ethically challenged companies and con valley. >> travis admitted for the first time he needs leadership help, so there are questions that strong coo,r, a --be an eric schmidt file style ceo, we do not know what he means by leadership help, but they have to make moves and bring people in. they have an acting cfo right now. there are a lot of highest level they need to fill. >> and have spoken in the past that benchmark has built really there, arianna huffington has been there for him, but even some of the big meters we think of have had to learn in the
process of becoming key ceos. >> but this is a $70 billion company. but at what point in the lifecycle of the process is this excusable? that is the question i hear from public invest in community, and folks might help them go out. community and folks who might help them go out. >> so many caches awash in private hands. to help the smaller players remain private. but yet snap, a younger company going public and losing money, it is ofisit that a revisit netflix, amazon, or google. when they went out, they were young companies. it is not what we have heard ubers andrs -- the airbnb's of the world.
there is talk of snap setting a good model for, these desk companies to get out earlier, but the proof is in the pudding. key telecoms event barcelona, everyone was excited with what would be happening with snap. another yardsso, , another pr disaster, the leader of that accused ofs being stealing technology from google. that has waymo, the -- out for that has weimo,- alphabet has
using it for this ongoing drive. this is nothing uber's cultural problems or anything about the civil route, so it is showing up without knowledge in the questions of the day. >> and we are going back and forth to the continent of europe and hearing what is going on there. i know a lot of the talk is about m&a, whether we are seeing consolidation on the telecom 5g, but many are hoping that. attendees atfew the conference. we have reported that spotify is looking going public in the second half of this year, and they cannot own numbers this week saying they have 50 million subscribers, up from 30 million subscribers less than one year ago, 40 million in september. your,ve seen a big growth
and your, and from an ipo perspective, the big questions have always around competition, right? if you can nail down record label contracts, that is competition. apple music came out and there were concerned about -- they were concerned about spotify, but 20 million subscribers validates spotify, saying we are doing something right. swedish-based company decides to do this, it will be fighting up we get another big-name company this year. scoop after scoop after scoop, thank you very much. oliver, back to you. much.: thank you so i am sure you will be at the bar later. i will join their -- join you there. later on bloomberg technology, carolyn will be speaking to
oliver: this is bloomberg markets, i'm oliver renick. scarlet: and i am scarlet fu. president trump campaign promise to build a border wall between the u.s. and mexico is been forward. the request for several prototypes of design structures are expected next week. companies are also lining up to participate as well. kerry, where are we with the contract process? has there been anything posted on government websites? we know something is coming next week, but what has been posted? early we are in the
stages of a contract to build the wall. customs and immigration service pre-request, if you will, for interested parties. there is a way for companies to raise their hand and say yes, we are interested in anticipating that participating. i checked before coming in, and as wellt 400 companies as individuals, lawyers, architects, and some of the biggest builders out there. big defensemics, a contractor. they are all raising their hands and saying please include us in upcoming information. a formal request will probably go out around march 10, the government said, and mockups of designs will be due for the end of the month and awards in mid-april. the rfq for the wall is out and companies are interested. we are talking about planning
before the show, there have been so much backlash for companies who have supported trump in any way. these companies will be building the wall. they are not the hot companies people tweet about, but is there a chance that this could intentionally slow things down for some of these companies associated with that? some companies may have reservations about jumping in early, especially about such a controversial object. that that, unlike uber, which had some issues with its ceo and , whichher companies consumers can sort of directly relate to and see every day and potentially participate in a boycott, cement is not something consumers are likely to boycott forced -- for large steel rods, these are not consumer things for the companies for the most part, and i think the rift has a
political backlash -- for a political backlash is minimal. among thosem x-rays who are interested -- cemex is among those who are interested. on theave not seen them early pre-solicitation, but they are certainly well positioned and company officials have suggested they could for dissipate. they have cement factories -- participate. they have cement factories on both sides of the border and could really participate supplying to the wall over. scarlet: from new york, this is bloomberg.
all of her: we're live in bloomberg headquarters in new york. over the next hours, we'll cover stories out of chicago, washington, edinburgh, and beijing. here are the top stories from around the world. an hour to go in the trading day, the s&p is on track for its first two-day slide since january 1. fred chair yellen says it will likely be appropriate to raise interest rates and a couple weeks. as it was not a very merry holiday for retailers. isse speaker paul ryan talking about a corporate tax overhaul. we will tell you what it could mean for the struggling sector. and we will talk about is the president will support debt relief. let's get a check on markets. what's going on?
julie: not much. we're off the lows of the day for sure. we started a little more deeply in the red. we are nearly back to the unchanged level, but we should mention it is the sixth straight week higher for the three major averages, so the uptrend remains intact. if we end up seeing a decline in the s&p 500 today, it will be the first two-day decline. it's also if you're looking at volume. read up here shows you how far below the 30-day trading average we are. earlier in the week, we had a big uptick in volume. really, one notable time during tradingwe saw volume
them. we got a classic trade of what happens when yields go higher. interest rate sensitive stocks hurt and financials on top, and that is what we're seeing today. are alsore and tech up, but really, it's financials limiting the declines in the rallies overall. individual stocks worth mentioning today that are dragging down the major averages. macy's falling after reuters reported the company is not in any talks with hudson's bay. macy's is skeptical hudson's bay can get financing for any sort of a deal according to reuters which cited people familiar. these are the three worst
performers in the s&p 500 today. outside of stocks, you have to look another asset classes and their reaction to janet yellen has commentary today. as we pointed out throughout the afternoon, reaction came earlier the fed chairen spoke and prepared the market for a rate increase on march 15. janet yellen putting a fine point on it. the 10-year yield only up a basis point. the dollar is actually lower. oil prices coming back 1.2%, and gold not much changed at the moment. thank you so much. the chair suggesting a rate hike is possible. >> the midi about -- the committee will evaluate if it claimant and inflation continue to evolve in line with expectations, in which case, a
further adjustment of the federal funds rate would likely be appropriate. what would a fed move mean for financial markets? joining us from new york is the chief investment officer at oppenheimer fund. thanks for joining us today. i know you look at the bond market to get it right more than the other asset classes, and yet , at the same time, you say rumors of the death of the bond market are greatly exaggerated. the 10-year yield just below 2.5%. started the week at 2.31%. what is your interpretation of move up we have seen? go in fed is going to march as opposed to june the way we with thinking before. having said that, the key point here is the fact that it is
percent.und 2.5 if you ask people around based on the performance of the bond and december,mber they would have told you yields would be closer to 3%. i think there in lies the real issue. the bond market is still, despite the fed desire to tighten policy in march, having difficulty latching on to the reflation trade. equity markets on the other hand continue to make new highs, not today but virtually every other day. there is a big disconnect. if fiscal policy does not come in and the level we're expecting -- at least the equity market is expecting -- i think we are going to have a problem because we are expecting significantly higher acceleration and growth and equity markets then in bond markets. up the just pulling
function and looking at that move up. it's incredible to see how quickly it moves and the potential for volatility in the way the market gauges expectations for the fed. what does that tell you about the tools with which traders and investors assess the likelihood macro it seems there's a lot of .nknowns ago, it until a week looked like the fed would not tighten in march. it was not based on any particular economic logic other than the fact that they had not come out and told us that. the moment they started talking to us about it, and it began couple of other people putting the big hammer down, when they started talking about that, the market effectively started pricing in a move in march. the point is the growth picture, inflation picture is good enough for them to tighten in march or june. they just decided to tighten in
march, and the markets have reacted quite aggressively to that. it's very unlikely that things change, and that affects the data flow that we see. it's very unlikely that things scarlet: if that is the case, could the equity market rise be reflective of the fact that the economy is getting better, so an interest rate increase is good news because it reflects a stronger economy? krishna: absolutely. very much so. not just in the u.s., on a global basis, the picture is quite good. we're looking at a significant uptrend in earnings. the question is how much of that is already discounted and the prices. for us to get to the next level from really high valuation levels already embedded in the marketplace, what are we looking for to happen in the real economy?
the answer to that is we are expecting a significant tax cut, a significant policy move on infrastructure and things like that. the asset test is does the ? ficit widene if not, growth will be a 2% but not accelerate and markets will have to do some adjustments. and i: that adjustment -- want to press a little bit more on this. the risk for u.s. equities is arguably greater than it has been at any point of this cycle here of the bull market. what about the underlying strength in earnings? we basically went a year without any earnings. now they are coming back. we look at the earnings yield relative to even though we had a bump up in the 10-year, the argument remains. thehere not still
opportunity for stocks that will keep them driving forward? .rishna: sure given current trends, earnings on a forward-looking basis are going to be higher rather than lower and growth is quite good and maybe accelerates some. the question is in the current context without any policy initiatives, can earnings growth is significantly higher than, let's say, 7% or 8%? if not, one could argue that information is already priced in. again, does not mean equities are going to have a substantial correction. that's not what i'm arguing for. i'm arguing for equities to go to the next level. for that to happen, you will have to see significant fiscal movement. to take it to the next level, we have to consider where investors are position.
krishna: because of the performance of u.s. markets relative to other markets, people have been coming into the equity markets and a very, very big way, and if you look at i think the, exposure on the bond site is probably larger. the markets to perform, there has to be a catalyst. the question is -- would that catalyst manifest itself? woodchuck deliver the initiative everyone has been talking about? deliver themp initiative everyone has been talking about? scarlet: thanks for joining us. mark: president trump arrived in orlando, florida, today and visited a private religious
cool, signaling that his education agenda will focus on school choice. teachers unions were quick to criticize the visit, saying it shows the president's hostility toward public schools. in his address to congress, mr. trump called education "the rights issue of our time" and asked lawmakers to pass a bill that would fund school choice. a man has been arrested in connection with threats made to eight jewish centers worldwide. federal authorities in new york said thompson is accused of making threats to harass an ex-girlfriend. he allegedly used the victim's of theile making some threats. government appointed investigators in ireland announced today that a mass grave containing the remains of babies and young children has been discovered at a former catholic orphanage. the finding confirmed a local historian's efforts to find out what happened to 800 children
who parish at the facility. the commission said excavations at the site uncovered an underground structure divided into 20 chambers containing "significant quantities of human remains." the home closed in 1961. syrian armies in the historic town of palmyra after security officials said government troops and allied militiamen recapture the historic town from extremists. the cleanup process is expected to be long and difficult because of the large number of mines planted by islamic state. global news 24 hours a day powered by more than 2600 journalists and analysts in over 120 countries. i'm mark crumpton. oliver: after a dismal holiday shopping season, retailers face
starting to become aware this could become a reality. potentially taxes could be hit more. a company like best buy swinging from a billion-dollar loss for the year -- billion-dollar game for the year to a $2 million loss. the other side says they are exaggerating it. going on in the public sphere about it. >> interesting. you don't really think about the pro-market, free-market republicans being opposed, companies like walmart and big retailers, how it changes the dynamic of where lobbying is coming from. >> really interesting bedfellows.
they have done a good job so far senate republicans to come out against it. orrin hatch. then you have the koch brothers -- they are against this plan, so they are going after their own republicans, mostly in the house. democrats are just kind of sitting back and watching all of this. they don't really have a fight in this game. scarlet: at the same time, if you consider the bigger backdrop for retailers, holiday numbers show it was a pretty dismal season. outgs have not been working for this sector overall. to what extent is this a knee-jerk reaction to the fact that the struggle is more structural rather than cyclical for retailers? >> for them, they look at it as a do or die.
like you said, a lot of things should have made this a good holiday for them. consumer confidence was up, growing economy, people have jobs, and they just did not perform. even stalwarts like costco did not have a good quarter, so that just makes it more serious for them. they have never had an issue like this come before them. obamacare just pales in comparison to this. let's look ataid, this simple chart looking at the s&p 500 versus the index. it would be thought a traditional game with republicans. how much of this is explained by structural impediments scarlet was talking about? >> it's interesting because when you see retail members going down, when analysts started coming out with notes and research, sort of saying this is a material risk to earnings
retailers. that was basically early december. you look at the chart, that's pretty much when they started to go off the trend of the general market going up, so that definitely spooked some investors. then you have structural things on top of that. fourth quarter dismal christmas, and then this coming through. maybe they will get their wish for the 3% gdp the trump campaign promises. scarlet: matt townsend, thank you so much. oliver: time for a look at some of the biggest stories in the news on this friday. caterpillar being sued by a shareholder who alleges deception the day after federal authorities raided its headquarters. the company is accused of making false and misleading statements, failing to disclose use of subsidiaries to avoid paying
millions in taxes. bloomberg obtained search warrant's that authorize a broad range of documents and electronic files. looking at thes price of skin treatments as part of a sweeping raid on the generic drug business. and the u.k. says it is leaning on intervening on 21st century fox's proposed takeover of scott. they say they will make a final decision within 10 days. fox already owns a nine by 39% stake in sky. the deal was officially referred to eu authorities today.
scarlet: it's time now for options insight with julie hyman. julie: thanks so much, guys. an investment advisor equity armor investments joins me now. obviously, we're not seeing much activity today volatility-wise, although we did see it earlier in the week. are you seeing any kind of notable options move, particularly in the wake of ? net yellen's speech >> not specifically in the last hour, so real quiet day. we are seeing the fix down --
down, but wee vix saw a huge rally on wednesday $1n the market decided trillion to much for trump to taper. i think the market is viewing it as we are at a new higher level right now and stabilizing at this area. folks you still seeing buy a lot of protection or thinking volatility will return? >> absolutely. we are still seeing a higher than normal skier -- higher than normal skew. that is still really elevated. with -- the potential for market correction is higher than normal.
werlet: looking at energy, have seen energy fall in little bit to the wayside in terms of investor attention recently. what are you looking at for the xle? trade, ime i look at a like to get away from the trade area more toward the strategy. a trade is a gamble. a strategy is an investment. oil is a great example or energy is a great sector right now to do an overlay strategy. we are in this tight range. 50 to 55 in crude. anytime against to the cheaper we see more of an incentive to cheat, so we see a tight range for where crude is. it's a great area to try to get some premiums out of owning stocks. xle atking at buying the
72 point five and selling the 73 call in april. for me, a two point 6% gain for a month and a half is good enough for me. julie: happy friday. still ahead, we will talk about greece. the greek ambassador to the united states joins us to talk presidente thinks the will support debt relief like his predecessor did or if he will take a harder stance. this is bloomberg. ♪
met with the naacp today. leaders of the nations oldest civil rights organization's a threatening decline. the attorney said this week that scrutiny could cause officers to be less effective in crime-fighting. california governor jerry brown 'subts many of president trump policy proposals will come to pass. in an interview with bloomberg, governor brown says the president is fighting battles on too many fronts and will be forced to temper his plans. he said the proposals will not recordcalifornia's .rosperity the prime minister spoke at the scottish conservative conference in glasgow. >> there is no economic case for breaking up the united kingdom or reducing the ties